Financial Statement Of Financial Statements

822 WordsNov 10, 20154 Pages
Financial Statements The business world requires exacting standards to ensure all costs are correctly accounted for and considered. To this end the financial statements have become the centerpiece for business evaluation. The income statement, balance sheet, statement of cash flow and ratios for analysis of financial statements play a critical role in business evaluation. Income Statement The income statement is a mainstay of business operations and expenses. This statement details the revenues and expenses over a time period (i.e. quarter, year, etc.) (Melicher. 2013). This statement incorporates important details of the business operations and profits generated. The key elements to look at on this statement are the gross profit, operating income and net income before taxes (Melicher. 2013). The gross profit includes cost of the goods with respect to revenue, a good indicator of not only what is being sold but what it costs to obtain goods. Also it should be noted that operating income and net income before taxes provides a good sense of what the company earns versus general/administrative expenses and the cost of interest. Tax is a constant that will affect earnings but incentives change this and can bolster and/or skew data. The balance sheet details other aspect of business. Balance Sheet The balance sheets provide similar data to the income statement but with a different objective. The balance sheet is used to capture the performance of a business with

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